With the technological advancements today, every industry is changing how it operates. When it comes to the banking sector, banks have to adapt to the behavioural changes of their customers. In short, bank operations are based on the expectations and behaviour of their customers. If the customers’ expectations change, so must businesses and their operations.
Today, digital banking has taken the market by storm. Since the beginning of the COVID-19 pandemic, a lot has changed, and the change might be here to stay. With social distancing and lockdowns in place, customers are in dire need of mobile services, and that is why there has been a rise in digital models of banking. Revolut bank, N26 and Starling Bank are just among the many popular names in this industry.
A somewhat new term in the banking and financial services industry, a neo bank is quite simply, an online-only bank. There is a very big difference between a neo bank and a traditional bank.
Traditional, brick-and-mortar financial institutions may provide mobile services, their main operations rely on their physical branches. But neo banks operate entirely digitally. That means everything is operated through digital channels like mobile apps or other online platforms.
Neo Banking and the Future
According to studies, neo banking is offering a fertile ground for banking, and the growth of the market is expected to grow with a high margin. The rapid growth is facilitated by the ease of opening accounts and the low cost of banking fees. Other things that will facilitate the growth of neo banks include the need for millennials to have banking options, small businesses that are in need of cheap and easy banking options as well as individuals with inconsistent or irregular incomes.
The Pros of Neo Banks for Small Businesses and Individual Consumers
- Neo banks do not require a physical branch and this aspect has helped the banks to gain more customer trust. These banks tend to offer the same services as traditional banks. Therefore, people can create accounts, get loans, save money and do a lot more from the comfort of their homes.
- Neo banks focus on convenience and time-saving. Thanks to Big Data and AI technologies, these banks can easily assess the best services to offer to their customers. Unlike traditional banks that assess a customer’s credit history and scores only to provide various services, neo banks include other aspects like the customer’s previous spending and their activities online. Including such factors increases the rate of approval, making sure that every customer has an equal opportunity.
- Neo banks are flexible for small businesses that still do not qualify for big loans from traditional banks. Since the toll of Covid-19, banks today are unable to provide loans to small businesses. They consider it risky. Neo banks helped in bridging this gap by providing financial options for small and medium-sized businesses. Since then, there has been a huge shift from traditional banks to neo banks.
Conclusion
Neo banks are influencing banking today, and with this influence, consumers will soon adapt to a new age of banking. Consumers and small businesses will have a lot of opportunities in the future thanks to the flexibility these banks provide. With online operation and ease of assessing reviews, it is possible that people will prefer neo banks to traditional banks now and in the future.
